Preços Cloro - Soda Cáustica

Chlor-Alkali & Derivatives Markets
PVC Committee Meeting at APIC 2013

Taipei, 10 May 2013
Charles Fryer
APIC 2013
US GULF CAUSTIC SODA & CHLORINE PRICES

$/Metric Ton
1,400
1,300
1,200
Caustic
CausticSoda
Soda
Ex
ExWorks
Works
1,100
1,000
900
800
700
600
500
400
300
Chlorine
Chlorine
Domestic
Domestic
200
100
0
2004
2005
2006
Source: Tecnon OrbiChem
2007
2008
2009
2010
2011
2012
2013
APIC 2013
US GULF CAUSTIC SODA & CHLORINE PRICES

$/Metric Ton
1,400
1,300
1,200
ECU
ECU
value
value
Caustic
CausticSoda
Soda
Ex
Works
Ex Works
1,100
1,000
900
800
700
600
500
400
300
Chlorine
Chlorine
Domestic
Domestic
200
100
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
APIC 2013
COST of ECU on the US GULF

$/Metric Ton
550
ECU Production
Cost
500
450
Energy Cost
of ECU
(27mmBtu
plus $30)
400
350
300
250
200
150
100
50
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
APIC 2013
NATURAL GAS, CRUDE OIL & COAL PRICES

$/mmBtu
30
US Nat Gas
$/mmBtu
Oil
$/mmBtu
equivalent
20
Coal
$/mmBtu
equivalent
10
WE Nat Gas
$/mmBtu
equivalent
13
20
12
20
11
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
20
19
99
APIC 2013
EFFECT OF ENERGY COST ON CASH COST OF

PRODUCTION OF THE ECU (Metric)
$/ECU
Cell Type
700
Diaphragm
Fuel oil
basis
600
Mercury
Membrane
500
Coal in
China
Natural Gas
at Source
400
300
Europe
200
Asia
USA
100
Middle East
Includes evaporation of lye to 50%
0
0
Energy Cost $/mmBtu

10 11 12 13 14 15
APIC 2013
US PVC EXPORTS
1,000 Metric Tons
3,200
2,800
2,400
2,000
1,600
1,200
800
400
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
APIC 2013
US GULF EXPORT CAUSTIC SODA

& CHLORINE PRICES
$/Metric Ton
1,200
1,100
1,000
900
800
700
600
500
400
300
200
100
0
-100
-200
-300
-400
2003
Caustic Soda
Chlorine
value FOB
into Exported
EDC
Caustic Soda
Gulf Coast
1.38 x [EDC - (0.285 x Ethylene) -20]
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
APIC 2013
CYCLES IN CHLOR-ALKALI BUSINESS

Chlorine Price
High
Higher
= 5-6 month trend
Price Trend
Plant
Utilisation
1 Chlorine up, Caustic down

2 Chlorine peak, Caustic up
3 Chlorine down, Caustic up
4 Chlorine down, Caustic peak
Lower
Low
Low
High
Caustic Soda Price

5 Chlorine trough, Caustic down
APIC 2013
ASIAN CAUSTIC SODA

& CHLORINE PRICES
Caustic Soda Liquid Spot Export FOB Northeast Asia

Chlorine value into Imported EDC
1.38 x [EDC - (0.285 x Ethylene) -20]
$/Metric Ton
4
600
3
5
1 Chlorine up, Caustic down

2 Chlorine peak, Caustic up
500
3 Chlorine down, Caustic up

4 Chlorine down, Caustic peak
400
5 Chlorine trough, Caustic down
300
200
100
0
2004
2005
2006
-100
-200
2007
2008
2009
2010
2011
2012
2013
APIC 2013
CHINESE CAUSTIC SODA & CHLORINE PRICES

Rmb/Metric Ton (inc. VAT)
Caustic
CausticSoda
Soda
Liquid
LiquidMarket
Market
membrane
membrane
3,200
2,800
2,400
2,000
1,600
1,200
800
400
Chlorine
Chlorine
Liquid
Liquid
0
2006
2007
2008
2009
2010
2011
2012
2013
APIC 2013
CHINESE VALUE OF ECU

$/Metric Ton/ECU
800
ECU Value Cl +
1.10 NaOH
700
Caustic Soda
Liquid Market
membrane
600
500
Chlorine
Liquid
400
300
All inc VAT
200
100
0
2006
2007
2008
2009
2010
2011
2012
2013
APIC 2013
PRODUCTION ROUTES TO PVC

EDC
EDC
Direct
Direct
Chlorine
VCM
VCM
Furnace
Furnace
VCM
Ethylene
EDC
EDC
Oxy
Oxy
Air
Chlorine
Hydrogen
Chlorine
Chlorine
Burner
Burner
Calcium Carbide
Water
HCl
Acetylene
Reactor
Reactor
HCl
PVC
VCM
VCM
Reactor
Reactor
VCM
PVC
APIC 2013
EAST CHINA RAW MATERIAL PRICES

Rmb/Ton (inc VAT)
5,000
Calcium Carbide
4,500
4,000
HCl (100%)
3,500
3,000
Liquid Chlorine
2,500
2,000
1,500
1,000
500
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
APIC 2013
EAST CHINA COAL vs CALCIUM CARBIDE PRICES

Rmb (inc VAT)
4,500
Calcium Carbide
Rmb/Ton
4,000
3,500
Coal
Rmb/2.5 Tons
3,000
2,500
2,000
1,500
1,000
500
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
APIC 2013
PVC CASH COST COMPARISON IN CHINA

$/Metric Ton
1,200
Ethylene
Based
1,000
Acetylene
Based
800
600
400
East China Rmb price less VAT

converted to US$
200
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
APIC 2013
EAST CHINA PVC PRODUCTION COSTS

(March 2013)
$/Ton (excl VAT)
1,200
Northeast Asia cfr International Supplies
1,000
800
600
400
Export Sales
Other
costs
Price in E China
ex works
Chlorine
(0.62) +
Hydrogen
Chlorine
(0.59)
CaC2 cost
(1.45)
Ethylene
(0.47)
200
0
Ethylene + Chlorine
Other costs
Calcium Carbide + HCl
APIC 2013
USA & CHINA CASH PVC PRODUCTION COSTS

(March 2013)
$/Ton ( for China excl VAT)
1,200
Northeast Asia cfr International Supplies
1,000
Export Sales fob

Other costs
800
Other
costs
600
Chlorine
(0.59)
Price in
E China
ex works
CaC2 cost
(1.45)
400
Ethylene
(0.47)
200
0
USA
Ethylene at cash
cost ex Ethane;
Chlorine at spot
price
USA
Ethylene contract
price + Chlorine
spot price
CHINA
Ethylene +
Chlorine
Chlorine
(0.62) +
Hydrogen
CHINA
Calcium Carbide
+ HCl
APIC 2013
PVC PRODUCTION COSTS vs CRUDE OIL PRICE

$/Ton
China can export PVC-A
1,500
Production cost of PVC-A (from calcium

carbide) in E China (excl VAT), Mar 2013
International
PVC cash cost
from ethylene
ex naphtha
cracker plus
chlorine at
ECU cost 2.1
International Price
NE Asia - March 2013
1,000
500
0
0
25
50
75
100
125
Brent Crude Oil Price $/bbl

150
APIC 2013
CHINA PVC-A PRODUCTION GROSS MARGIN

$/Ton
1,200
Acetylene Based
(Cash Cost)
1,000
800
Acetylene Based
(Price ex. VAT)
600
Difference between
Acetylene Based
Price (ex VAT) and
Acetylene Based
Cash Cost
400
200
0
-200
2005
2006
2007
2008
2009
2010
2011
2012
2013
APIC 2013
CHINA PVC-E PRODUCTION GROSS MARGIN

$/Ton
1,200
Ethylene Based
PVC Cash Cost
1,000
Ethylene Based
PVC Price
(excl. VAT)
800
600
Difference between
Ethylene Based
Price (ex VAT) and
Ethylene Based
Cash Cost
400
200
0
-200
2005
2006
2007
2008
2009
2010
2011
2012
2013
APIC 2013
CHINA PVC EXPORTS vs CRUDE OIL PRICE

1,000 Metric Tons
120
$/bbl
200
180
100
80
160
140
120
60
100
80
40
20
60
40
20
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Brent
Crude Oil
PVC Exports
APIC 2013
CRUDE OIL PRICE, ECU COST, CFBT, CHLORINE PRICE

& CAUSTIC SODA PRICE RELATIONSHIP
700
600
500
400
T%
C FB
25%
20%
700
15%
10%
5%
500
600
400
0%
300
300
200
200
100
100
0
0
50
100
Chlorine Price per ton
$0
800
$1
00
800
$2
00
900
$3
00
900
$4
00
ECU $ Cost and Cash Flow
150
US Domestic
Mar 2013
0
100
200
300
400
500
600
Caustic Soda Price $/ton
700
800
APIC 2013
SHOULD WE SELL LOW-PRICED EDC TO MAKE

ADDITIONAL CAUSTIC SODA AVAILABLE FOR SALE?
ECU $ Cost and Cash Flow
ECU
600
400
$0
600
500
400
0%
300
-$
700
15%
10%
5%
500
10
0
T%
C FB
25%
20%
700
$1
00
800
$2
00
800
Chlorine Price per ton

$3
00
900
$4
00
900
300
200
200
?!
100
US Export
Mar 2013
100
50
100
150
100
200
300
400
500
600
Caustic Soda Price $/ton
700
800
APIC 2013
CONCLUSIONS
The slump in building construction in the USA and Europe and the 2012
slowdown in the Chinese economy led to weakened prices for vinyl chain
products, worldwide, weak chlorine values and therefore high caustic soda
prices BUT
o Building construction is recovering in the USA
o Asian caustic prices are now in decline, so
o Chlorine values are likely to recover, then strengthening PVC prices
Low-cost gas from shale has greatly strengthened the US competitive position
for chemicals, particularly for vinyl products
o US ethylene production costs from ethane are far lower than from naphthabased crackers widely used in Asia and Europe
o US electrical power costs and hence the cost of the ECU are lower than for
most other chlor-alkali producers
o Hence US producers of EDC, VCM and PVC have a huge competitive
advantage
o US advantages will last for many years
APIC 2013
CONCLUSIONS continued
The traditional chlor-alkali cycle seems to have entered a causticweakening and chlorine-strengthening phase, at least in Asia. If there is
economic improvement in 2013 we can expect that worldwide:
o Operating rates and chlorine values will rise
o Caustic soda prices will decline
Chinese PVC, largely acetylene-based, had lost competitiveness in 2011-2012
based on high coal costs, but a decline in coal prices over the past 12 months
is leading to better margins and rising export flows.
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Chlor-Alkali & Derivatives Markets

PVC Committee Meeting at APIC 2013

US GULF CAUSTIC SODA & CHLORINE PRICES

Source: Tecnon OrbiChem

US GULF CAUSTIC SODA & CHLORINE PRICES

Source: Tecnon OrbiChem

COST of ECU on the US GULF

Source: Tecnon OrbiChem

NATURAL GAS, CRUDE OIL & COAL PRICES

Source: Tecnon OrbiChem

EFFECT OF ENERGY COST ON CASH COST OF

Includes evaporation of lye to 50%

Energy Cost $/mmBtu

Source: Tecnon OrbiChem

US GULF EXPORT CAUSTIC SODA

Source: Tecnon OrbiChem

CYCLES IN CHLOR-ALKALI BUSINESS

= 5-6 month trend

1 Chlorine up, Caustic down

3 Chlorine down, Caustic up

4 Chlorine down, Caustic peak

Caustic Soda Price

5 Chlorine trough, Caustic down

ASIAN CAUSTIC SODA

Caustic Soda Liquid Spot Export FOB Northeast Asia

1 Chlorine up, Caustic down

3 Chlorine down, Caustic up

5 Chlorine trough, Caustic down

Source: Tecnon OrbiChem

CHINESE CAUSTIC SODA & CHLORINE PRICES

Source: Tecnon OrbiChem

CHINESE VALUE OF ECU

All inc VAT

Source: Tecnon OrbiChem

PRODUCTION ROUTES TO PVC

Source: Tecnon OrbiChem

EAST CHINA RAW MATERIAL PRICES

Source: Tecnon OrbiChem

EAST CHINA COAL vs CALCIUM CARBIDE PRICES

Source: Tecnon OrbiChem

PVC CASH COST COMPARISON IN CHINA

East China Rmb price less VAT

Source: Tecnon OrbiChem

EAST CHINA PVC PRODUCTION COSTS

Source: Tecnon OrbiChem

Calcium Carbide + HCl

USA & CHINA CASH PVC PRODUCTION COSTS

Northeast Asia cfr International Supplies

Export Sales fob

Source: Tecnon OrbiChem

PVC PRODUCTION COSTS vs CRUDE OIL PRICE

China can export PVC-A

Production cost of PVC-A (from calcium

Brent Crude Oil Price $/bbl

CHINA PVC-A PRODUCTION GROSS MARGIN

Source: Tecnon OrbiChem

CHINA PVC-E PRODUCTION GROSS MARGIN

Source: Tecnon OrbiChem

CHINA PVC EXPORTS vs CRUDE OIL PRICE